Classification of factories for the purpose of levying excise duty based on output cannot be made arbitrary or discriminatory, and any such classification must have a reasonable nexus to the object sought to be achieved.

MADHAVA REDDY, J. :- The petitioner applied for a licence to manufacture safety matches on 2-1-1965 and was granted the same on 10-2-1965 by the Superintendent of Central Excise, Cuddapah. The production of matches however commenced in the month of October, 1966 and the first clearance was effected on 29-12-66 after paying Excise Duty. The petitioner produced nearly 900 gross match boxes. Under item 38 of Schedule 1 to the Central Excises and Salt Act, 1944 read with Section 3 of the Said Act matches are excisable to duty at a maximum rate of Rs. 0-65 p. per thousand matches. Under section 3 (3) the Government is empowered to fix different tariff values for different classes or descriptions of the same article. Rule 8 (1) of Central Excise Rules, 1944 framed under the Central Excises Act empowers the Central Government to exempt any excisable goods from the whole or any part of the duty leviable on such goods. The Central Government in exercise of powers conferred by Rule 8 (1) of the Central Excise Rules and in supersession of Notification No. 97/64 Central Excise dated 17-4-1966 issued Notification No. 75 dated 30-4-1966 re-classifying the manufacturers of matches and fixing different rates of duty for matches cleared by different categories of factories. The said notification in so far as it is relevant for our purpose reads as follows :

Government of India.

Ministry of Finance (Dept. of Revenue and Insurance)

Notification No. 75, dated 30th April, 1966.

In exercise of the powers conferred by Sub-Rule (1) of Rule 8 of the Central Excise Rules, 1944 and in supersession of the Notification of the Government of India in the Department of Revenue and Company Law in the Ministry of Finance No. 97/64 Central Excises, dated the 17th April, 1964, the Central Government hereby exempts matches specified in Column (2) of the Table 1 below, falling under item No. 38 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) and cleared by any manufacturer for home consumption during any financial year, from so much of the duty of excise leviable thereon as is in excess of the rate specified in the corresponding entry in column (3) of the said table :

TABLE-I.

Categor y.

Specification of matches. Rates.

(1)

(2)

(3)

A. Matches cleared for home consumption from a factory the output of which in the financial year 1964-65 exceeded 4,000 million matches.

Rs. 4-60

B. Matches cleared for home-consumption from a factory the output of which in the financial year 1964-65 exceeded 500 million matches, but did not exceed 4,000 million matches :

(i) on the first 4,000 million matches cleared ; Rs. 4-40

(ii) on matches cleared in excess of 4,000 million and upto 8,000 million matches.

4-50

C. Matches cleared for home-consumption from a factory the output of which in the financial year 1964-65 exceeded 75 million matches but did not exceed 500 million matches :

(i) on the first 500 million matches cleared ; 4-10

(ii) on matches cleared in excess of 500 million and upto 750 million matches.

4-25

D. Matches cleared for home-consumption from a factory the output of which in the financial year 1964-65 did not exceed 75 million matches :

(i) on the first 75 million matches cleared ;

3-75

(ii) on matches cleared in excess of 75 million and upto 100 million matches. 3-00

Provided that :

(1)..... .......

(1) (a) (b) ........

(2) and (3) .........

(4) The category of the factory for the first financial year of production in respect of which the manufacturer applied or applies for a licence on or after the 1st April 1964, shall he determined on the basis of the estimated production in his factory calculated pro rata for the whole financial year : and if the production for the financial year so estimated does not exceed 4,000 million matches and if the matches to be manufactured are those, the splints of which are not to be made of bamboo or the boxes of which are not to be m